Courts: Maybe public pensions can be cut

U.S. bankruptcy courtOne theme CalWatchdog.com has covered over the years is that public pension programs are not sacrosanct. Although the general interpretation of the California Constitution is that the pensions must be paid — no matter what — if there’s no money, there’s no money.

As attorney Mark Cabaniss wrote on this news site in Sept. 2012:

“Even if politicians’ pensions are contracts protected by the Constitution, they are still breakable.  In pretending otherwise, the politicians are lying.  In other words, merely noting that pensions are contracts protected by the Constitution is not the end of analysis, but only the beginning, for all contracts are breakable, and all constitutional rights are subject to limits.”

Now the Los Angeles Times reports:

As millions of private employees lost their pension benefits in recent years, government workers rested easy, believing that their promised retirements couldn’t be touched.

Now the safety of a government pension in California may be fading fast.

It cited Stockton’s bankruptcy:

In his written opinion, U.S. Bankruptcy Court Judge Christopher M. Klein blasted CalPERS as “a bully” for weighing in on the proceeding to insist — wrongly — that the city had no choice but to pay workers their promised pensions.

Karol Denniston, a public finance lawyer at Squire Patton Boggs, said Klein’s ruling was “critical for every municipality in California.”

“Next time we see a Chapter 9 bankruptcy filing,” she said, “pensions will be up for negotiation just like every other creditor.”

The skyrocketing bill for pensions is a problem for cities across the state. Californians now owe nearly $200 billion for pensions promised to state and local government workers, according to an analysis by Adam Tatum, research director at California Common Sense, a nonprofit think tank.

The key event will be the next recession, when more may go bankrupt and face: a) eliminating key services, such as police and fire, that are the reason governments exist in the first place; b) raising taxes to unsustainable levels that drive out business and personal taxpayers; c) cutting pensions, despite what the California Constitution supposedly says; or d) some combination of the above.

When there’s no money, there’s no money.

8 comments

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  1. Ronald Stein
    Ronald Stein 19 March, 2015, 11:21

    The inmates are running the Asylum. The major problem is that most current public employees are guaranteed defined-benefit plans, under which their benefits are guaranteed no matter how well, or badly, the underlying pension investments perform.

    Reforms could include, at a minimum, a shift to defined employee contributions plans, rather than defined benefit plans, for new hires, under which employee contribute a certain amount, usually with matching contributions from the taxpayers. The final pension payout then is not guaranteed, but depends on how well the investments perform. The taxpayers are not on the hook for poor investment performance.

    Public sector contracts negotiated by public sector employees that hammer out a contract that forces under duress a third party, taxpayers, to cough up the necessary dough, doesn’t seem too pass the smell test. In fact, it more closely resembles racketeering. Any challenges to that “racket” would be heard before judges who have pension and benefit package they want to protect. Again, seems like a racketeering cover-up right before our public eyes.

    Fiscal irresponsibility protects the jobs of bureaucrats who use their power in ways that harm those who work for a living.

    Reply this comment
  2. Ted
    Ted 19 March, 2015, 15:24

    Ronnie Bird–

    In a rep democracy like, well, ah, the USA, parties are never “3rd parties under duress” like you suggest. They have reps in every single col bargaining vote.

    Show me ANY legal authority from ANY jurisdiction to the contrary.

    Your Spirit Guide,
    Ted The Inevitable

    Reply this comment
  3. NTHEOC
    NTHEOC 19 March, 2015, 17:13

    The key event will be the next recession, when more may go bankrupt and face:a) eliminating key services, such as police and fire, that are the reason governments exist in the first place; b) raising taxes to unsustainable levels that drive out business and personal taxpayers; c) cutting pensions, despite what the California Constitution supposedly says; or d) some combination of the above.
    When there’s no money, there’s no money.
    ————————-
    Lol, best DOOMER rant in a while! You gotta love them, for some reason I sure do……..lmao.

    Reply this comment
    • ricky65
      ricky65 20 March, 2015, 20:32

      I’m thinking you showed your true fears by just blowing off the article as nonsense and ending with a nervous ‘lol’ & ‘lmao’.
      Maybe you should have added ‘wptg’.
      ‘Whistling past the graveyard’…

      Reply this comment
  4. Ulysses Uhaul
    Ulysses Uhaul 19 March, 2015, 23:44

    Lotta good people going to end up poor……betrayal.

    CWD appears to bring out the worst in you doomers. Respect yourself. Remember public employees are your neighbors, friends, church members, protect you, your kids and your property…

    Reply this comment
    • Donkey
      Donkey 23 March, 2015, 07:55

      Ahaul, quit lying to yourself! A RAGWUS feeder is a sociopathic thief, and friend to no one! 🙂

      Reply this comment
  5. SkippingDog
    SkippingDog 21 March, 2015, 12:19

    Interesting that all of the anti-federalists and states righters here on CWD just love the 10th Amendment when it suits their political purposes. When it comes to Chapter 9 bankruptcies, it was a 10th Amendment argument that got the previous iteration of the statute thrown out by the Supreme Court.

    Assuming Judge Klein’s dicta about impairing contracts protected under a state constitution is attempted by San Berdoo or some other town, it will be interesting to see if the wingnuts continue to support the 10th Amendment.

    http://jurist.org/dateline/2013/08/igor-shleypak-detroit-bankruptcy.php

    Reply this comment
    • Donkey
      Donkey 23 March, 2015, 08:00

      Using the RAGWUS to negotiate contracts for its feeders as justification for honest and fair outcome is no different than having the Nazi’s over seeing the heath and welfare of the Jews. 🙂

      Reply this comment

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John Seiler

John Seiler

John Seiler has been writing about California for 25 years. That includes 22 years as an editorial writer for the Orange County Register and two years for CalWatchDog.com, where he is managing editor. He attended the University of Michigan and graduated from Hillsdale College. He was a Russian linguist in U.S. Army military intelligence from 1978 to 1982. He was an editor and writer for Phillips Publishing Company from 1983 to 1986. He has written for Policy Review, Chronicles, LewRockwell.com, Flash Report and numerous other publications. His email: [email protected]

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